# Video succinctly explains bubble.

viewtopic.php?f=10&t=19981

This video succinctly explains how damaged the world economy has become.
chrismartenson.com/crashcour … 15-bubbles

It is easy to understand and clearly explains why 500,000 for a three bedroom house anywhere in Ireland is plain silly. After you have watched it if you are not ready to believe that a three bed in a good area of Dublin is worth circa 150,000 then let me know your reasoning.

A few quotes.
A bubble is roughly symmetrical. i.e. prices return to pre bubble. (This means check what your gaff was worth in 1998. Add inflation and that is the approx value of your gaff. It doesn’t matter if you believe it. It is true.)

There is no means of avoiding the final collapse of a boom brought about by credit expansion.

Excellent video!

So the typically house in Ireland was E120,000 in 1998.The top of the bubble was 2006(E370,000) so eight years to go up and eight years to correct,that makes 16 years,as it says above,add in inflation, here are a few possibilities:

2% inflation 1.37X120,000=165,000 (55% fall from the peak)
3% inflation 1.60X120,000=192,000 (48% fall from the peak)
4% inflation 1.87X120,000=225,000 (40% fall from the peak)
5% inflation 2.18X120,000=262,000.(30% fall from the peak)

Not quite the 80% predicted by Dr.Kelly is it?
As prices have already fallen around 30% from the peak of 370,000 for the average house to around 260,000,it is obvious that if the above prediction is correct we are very near the bottom, if I wasn’t so polite I would ask you all to pick your own personal bottoms.

The tulip example is clearly not symmetric.
The one from the 1920’s is much shorter on the downside then the long side, even though he claims it’s the same on both sides.

There is a massive difference between 2% inflation and 5%.
If we have deflation or very very low inflation for the next ten years and we take 3.5% as the average inflation over the last eleven years then inflation would likely land below 2%.
Say 1%? Or even less.
BTW I do know you predict hyper inflation. For the Euro area I think you are wrong. I think we could potentially have inflation for a short period but it will be quickly fixed. A for the US. Hyper inflation do doubt and a dropping of the dollar as the currency of trade.

Bertie,
As you’ve pointed out,a small difference in the inflation rate over a long period of time gives huge differences in the final result,so it is virtually impossible to know what will happen as regards the price of your average house in ten/fifteen years time.

One thing you can rely on,with absolute certainty is that bankers and politicians are LYING SCUMBAGS.Jim Rogers,Peter Schiff and Mark Faber are all on record advising people not to listen to their promises about inflation and preserving the value of currencies.They have all told you the governments will just print money, and that is precisely what they are now doing,the Swiss, the Fed and the Bank of England.

The Bank of England had a commitment to control inflation just like the ECB,when did you last hear that mentioned in the press or on the TV news bulletins?

It has simply been tossed aside,and a media blackout placed on it ever being mentioned again.Why would the ECb be any different?

It’s up to you,but to base your entire financial future on the promise of the ECB seems to be a surefire recipe for disaster IMHO.

If you just had 3.5% inflation for eleven years as you mentioned and then 0% for five years the house would still cost 175,000! The inflation figures above might need,in “Bankerspeak”,to be revised in a few years if the ECb follow the rest of the central banks. I don’t know how much longer they can hold out in this beggar thy neighbour devaluation of the currencies game,keep your eye on the Euro exchange rate for the answer to that one.Any significant weakening will show us that the FX market has sussed the ECB have thrown the towel in.

In my opinion we were already in a bubble in 1998, House prices were rising at close to 20% P/A The government had commissioned the First bacon report at this stage. ( esatclear.ie/~buildingwithbacon/br1.htm )
In Jan 1998, national average house price was €95,000 Dublin average was 117,000 and FTB national average was €83,000, ( esri.ie/irish_economy/permanent_tsbesri_house_p/hpi_tables_JAN_2009.pdf ), You picked a very high number for 1998 baseline.
The peak price for Dublin was €430,000 ( you seemed to find a low number there)

Up to this time FTB’s did not buy apartments but purchased there first home when they were close to 30 years old and getting married. This was typically a small 3 bed semi-detached house.
reported inflation in the period 1998 - 2006 was 36% or 48% 1998 - 2008, ( cso.ie/statistics/conpriceindex.htm )
average inflation for the past 4 years is less than 4%

using the same logic as you 4% inflation = 49% drop or 3% inflation = 56% drop to get to 1998 Bubble prices.
Our crash in nominal terms is going to be around 50% over the next 8 years which is impressive when compound interest of inflation is taken into account.

Its great article, I am watching whole process, normally yank economist try to have agenda rather then facts. They have their agenda either pro or anti. Its really hard to find balanced view on bubble, peak oil, real GDP etc.

A good brain food!!

Did we have one beds in 1998? I think we just had bedsits…

The average rise in property over the ten years of the boom was 14.9% (effectively a doubling in prices every 5 years)

Source: PTSB house index ten year review
finfacts.ie/biz10/10yearreview.ppt [powerpoint or viewer required]

Quiet right, No-one aspired to living in a one (or two) bed back in the early boom years, In the south east It was a 3 bed semi or Bungalow bliss.
Landlords bought bedsits for the rental market.

Back in 1998 Ireland was not operating in a severe global recession, quite the opposite in fact and you haven’t taken this into account and therefore referring back to 1998 prices is way too optimistic.

All of these predictions may or may not come true, but each prediction represents what you personally want to happen. In other words, wishful thinking. You have no idea whether we will have very very low inflation or deflation for the next ten years (and neither does anyone else). Predicting the dropping of the dollar as the currency of tade is a brave prediction to make, care for a modest wager on that one?